A Monthly Double-Blind Peer Reviewed Refereed Open Access International e-Journal - Included in the International Serial Directories. International Research Journal of Commerce and Law (IRJCL)
Website: www.aarf.asia. Email: editoraarf@gmail.com , editor@aarf.asia
Page 18
THE RELATIONSHIP BETWEEN CORPORATE SOCIAL
RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT
Dr. Subhash Chand1
Kavita Narwal2
Sushma rani3
ABSTRACT
While attention for the social and environmental impact of international business is certainly not new, the past years have seen renewed interest due to pressing global problems. Firms are increasingly called upon to play a positive role, and thus contribute to a more sustainable development. The concrete proposed solution globally lies in the concept of social responsibility of the enterprise in their policy of sustainable development. Therefore corporate social responsibility and sustainability is essentially a way of conducting business responsibly. The philosophy and spirit of corporate social responsibility and sustainability should be embedded in the core values of all enterprises, be imbibed by the employees at all levels and it should infuse into all the activities, processes, operations and transactions of the enterprises.
Today Companies Act - 2013 makes it mandatory for the companies to spend 2% of its net profit in the preceding immediate three financial years on CSR related activities. GRI guidelines (at present G-4 is in effect) emphasises on sustainable development through contribution in economic, environmental and social development. As per ISO 26000, the objective of social responsibility is to contribute to sustainable development, having impact on society and environment. 7 key principles and 7 core subjects are given in ISO 26000 guidelines in this regard. Gandhi's concept of trusteeship focuses on conducting business in a socially responsible way wherein capitalists act as trustee rather than owner of their business. These issues clearly establish a relationship between corporate social responsibility and sustainable development. At present companies are using its sustainability reports as channel for communication to external world regarding its CSR activities and is gaining popularity.
1
Associate Professor, Department of Commerce, Kurukshetra University, Kurukshetra. E-mail: sbains@rediffmail.com. 2
Guest Lecturer, Shyam Lal College, University of Delhi, Delhi. E-mail: kavitanarwaldse@gmail.com. 3
A Monthly Double-Blind Peer Reviewed Refereed Open Access International e-Journal - Included in the International Serial Directories. International Research Journal of Commerce and Law (IRJCL)
Website: www.aarf.asia. Email: editoraarf@gmail.com , editor@aarf.asia
Page 19 Keywords: CSR, sustainable development, sustainability, GRI, ISO 26000.
Paper Type: Conceptual
Introduction
World Business council for Sustainable Developments (WBCSD) defines CSR as
"Continuing commitment by business to behave ethically and contribute to economic
development while improving the quality of life of the workplace and their families as well as
local community at large." European Commission (EC) defines CSR as "the responsibility of
enterprises for their impacts on society". To completely meet their social responsibility,
enterprises "should have in place a process to integrate social, environmental, ethical human
rights, and consumers concerns into their business operations and core strategy in close
collaboration with their stakeholders".
The above given definitions of CSR is more relevant in present scenario where sustainability
has become the buzzword. The aim of both of these definitions is to enhance positive impacts
through innovation of products/services that are beneficial to the society and to business
organisation themselves, and to minimise negative impacts on stakeholders.
USA model of CSR is based on philanthropic where organisation makes profit and then
donates a share of profit for charitable purpose. European model of CSR focused on making
investment in communities. In developing countries model of CSR is based on making profit
for the organisation and stakeholders and achieving positive impact on society. Keeping in
mind the above three different aspects of CSR , The United Nation Industrial Development
Organisation (UNIDO) defines CSR as "the way company achieve balance or integration of
economic, environment and social imperatives while addressing shareholders expectations.
This definition seems more effective as it make CSR concept beyond charity, sponsorship
and philanthropy.
The emergence of CSR and sustainable development as important concerns of business
activity is the result of realization that any business concerned with the sole motive of profit
maximization for shareholders, in disregard of societal and environmental concerns is bound
to fail in the long run. CSR policies are closely linked with the practice of sustainable
development. Sustainability practices through CSR involves conduct of business operations
in a way that minimizes harm to environment and local communities, while benefitting
A Monthly Double-Blind Peer Reviewed Refereed Open Access International e-Journal - Included in the International Serial Directories. International Research Journal of Commerce and Law (IRJCL)
Website: www.aarf.asia. Email: editoraarf@gmail.com , editor@aarf.asia
Page 20
initiatives, companies can enhance customer satisfaction, and simultaneously boost business
growth and profitability. R&D department in companies help in sustainability efforts through
innovation that are beneficial for the environment and society. Infact, CSR activities are
generally so full with content of, and focused on sustainable development that often CSR
initiatives cannot be easily separated from sustainability policies. Since CSR and
sustainability are so closely entangled, it can be said that CSR and sustainability is a
company’s commitment to its stakeholders to conduct business in an economically, socially
and environmentally sustainable manner that is transparent and ethical.
For leading companies, sustainability or CSR is not only a matter of public relations or
philanthropic activities but also strategic initiatives that is carefully integrated into business
functions. Sustainable development is the development that meets the needs of the present
without compromising the ability of future generations to meet their own needs. It implies
three dimensions -
- Technology
- Resources and social structure, and
- Limits of each
Our government stands up firmly to make sure that the current and original development
actions remain in balanced and optimal harmony with ecosystem and environment. This in
turn will lead to better human security as well. Therefore maintaining environmental and
social security idea is not just the responsibility of government but equally demands a
proactive and effective involvement and participation from the companies and industries.
Hence government of India came up with new guidelines for the corporates in the new
Companies Act - 2013 to have a mandatory CSR activity in their company.
Objective: To study the relationship between Corporate social responsibility and sustainable
development
CSR under Companies Act 2013
The companies Act 2013 define CSR as activities that promote poverty reduction, education,
health, environmental sustainability, gender equality, and vocational skill development.
While this definition of CSR is broad and open to interpretation, it clearly emphasizes
corporate philanthropy rather than strategic CSR. The Act does, however specify that
A Monthly Double-Blind Peer Reviewed Refereed Open Access International e-Journal - Included in the International Serial Directories. International Research Journal of Commerce and Law (IRJCL)
Website: www.aarf.asia. Email: editoraarf@gmail.com , editor@aarf.asia
Page 21
India, the only country in the world, is bent to make sure to corporates to take up socially
responsible activities by making it mandatory. With this each of the companies, private or
public limited, either with a net worth of Rs. 500 crores or turnover of Rs. 1000 crores or net
profit of Rs. 5 crores has to spend a stipulated amount of 2% of its total net profit in the
preceding immediate three financial years on CSR related activities. The Companies Act
2013 is likely to bring many SMEs into the CSR fold.
A review of Companies Act 2013, Section 135 and schedule VII clearly indicate a
relationship between CSR and sustainability. Therefore, companies' CSR activities,
mentioned in the Act, will contribute in sustainable development of the country.
Global Reporting Initiatives (GRI)
The GRI has a vision of sustainability. GRI’s vision is that reporting on economic,
environmental and social performance by all organizations becomes as routine comparable as
financial reporting. GRI accomplishes this vision by developing, continually improving and
build up capacity around the use of its sustainability reporting framework. Sustainability
reports help organizations to set goals, measure performance and manage change in order to
make their operations more sustainable. In doing so, sustainability reporting makes abstract
issues tangible and concrete, thereby assisting in understanding and managing the effects of
sustainability developments on the organization’s activities and strategies.
The GRI sustainability reporting guidelines are periodically reviewed to provide the best and
most up-to-date guidelines for effective sustainability reporting. At present G-4 is in effect.
As with all GRI guidelines, G-4 includes references to widely accepted and used issue
specific reporting documents, and is designed as a consolidate framework for reporting
performances against different codes and norms for sustainability. Sustainability information
that is relevant or material to a company’s value prospects should therefore be at the core of
integrated reports. The three categories and their aspects are discussed in the following table:
Table: Categories and aspects in the guidelines
Category Economic Environmental
Aspects Economic performance Materials
Market presence Energy
A Monthly Double-Blind Peer Reviewed Refereed Open Access International e-Journal - Included in the International Serial Directories. International Research Journal of Commerce and Law (IRJCL)
Website: www.aarf.asia. Email: editoraarf@gmail.com , editor@aarf.asia
Page 22
Biodiversity
Emission
Effluents and waste
Products and services
Compliance Transport Overall Supplier environmental assessment Environmental grievance mechanisms
Category Social
Sub-categories
Labour practices Human rights Society Product
responsibility
Aspects
Employment Investment Local
communities Customer health and safety Labour/management relations Non
discrimination Anti-corruption
Product and service labelling Occupational health and safety Freedom of association and collective bargaining
Public policy Marketing
communications
Training and education Child labour
Anti-competitive
behaviour
Customer
privacy
Diversity and equal
opportunity
Forced or
compulsory
labour
Compliance Compliance
Equal remuneration for
women and men
Security
practices
Supplier
A Monthly Double-Blind Peer Reviewed Refereed Open Access International e-Journal - Included in the International Serial Directories. International Research Journal of Commerce and Law (IRJCL)
Website: www.aarf.asia. Email: editoraarf@gmail.com , editor@aarf.asia
Page 23
impacts on
society
Supplier assessment for
labour practices
Indigenous
rights
Grievance
mechanisms
for impacts on
society
Labour practices
grievance mechanisms Assessment
Supplier human
rights
assessments
Human rights
grievance
mechanisms
ISO 26000: Guidelines on CSR
As per ISO 26000 guidelines, the objective of social responsibility is to contribute to
sustainable development. ISO 26000 defines CSR as the responsibilities of an organisation
for the impacts of its decision and activities on society and environment, through
transparency and ethical behaviour that contribute to sustainable development, including
health and welfare of society. Here definition of CSR correlates with the social and
environmental dimensions of sustainable development. Thus, CSR is a good way of doing
business strategically and profitability.
The seven key Principles, advocated as the roots of socially responsible behaviour, are:
- Accountability
- Transparency
- Ethical behaviour
- Respect for stakeholder interests
- Respect for the rule of law
- Respect for international norms of behaviour
A Monthly Double-Blind Peer Reviewed Refereed Open Access International e-Journal - Included in the International Serial Directories. International Research Journal of Commerce and Law (IRJCL)
Website: www.aarf.asia. Email: editoraarf@gmail.com , editor@aarf.asia
Page 24
The ISO 26000 is based on seven core subjects or requirements which indicate relationship
between CSR and sustainable development are:
- Labour practices
- The environment
- Fair operating practices
- Human rights
- Consumer issues
- Organisational governance, and
- Development of the community and society.
CSR and substantial development: Gandhian perspective
"The industry should regard themselves as trustee of the poor". So, CSR can be traced to a
Ghandi's concept of trusteeship, which means that capitalists to act as trustee (not owners) of
their property and conduct of themselves in a socially responsible way.The philosophy of
trusteeship is inherent goodness of human beings. It involves the capitalists and landlords in
the service of society without any element of coercion. It does not want the destruction of
capitalists. Gandhi himself believed that their destruction would result in the end of the
workers. Thus, Gandhi's ideas focused around the concept of dharma-
- duty to the society
- the role of business as being that of a trustee or steward of what you hold, and
- surplus wealth needs to be kept in trust for common good and the welfares of
others.
Thrust area of CSR and sustainability
The CSR involves applying the concept of sustainable development to the corporate world.
With the help of above discussion i.e. ISO 26000, The Companies Act - 2013 and GRI
guidelines, for CSR and sustainability following activities can be thrust upon:
- capacity building
- Empower of communities
- Inclusive socio-economic growth
- Environment protection
A Monthly Double-Blind Peer Reviewed Refereed Open Access International e-Journal - Included in the International Serial Directories. International Research Journal of Commerce and Law (IRJCL)
Website: www.aarf.asia. Email: editoraarf@gmail.com , editor@aarf.asia
Page 25
- Development of backward regions, and upliftment of the marginalised and
under privileged section of society.
Sustainability as communication tool for CSR
The sustainability reports are released by the corporates for the stakeholders showcase the
social activities undertaken by the companies. The companies have CSR activities and
strategies since public, customers and investors expect them to be sustainable and
responsible. The definition for reports on sustainable development has been stated as the
public reports by companies. This usage of sustainability report is one of the recent ways for
CSR communication used by the companies. The sustainability reports released by
companies are a platform for the company to show to all the stakeholders from a top level
regarding the positive responsible corporate citizenship the company follow. CSR activities
can also act as differentiating factor for many companies and they can identify their
uniqueness in this manner. Thus, the sustainability reports are channels for communicating to
the external world used to communicate regarding its CSR activities and are gaining
popularity among various companies. It gives legitimacy to companies' activities and actions,
and aids in covering up and preventing the negative attitudes associated with big corporates
and their actions.
CSR sustainability benefits
CSR and sustainability, if discharged sincerely, is perceived to bring with its several benefits
for the companies. The spin off can be by the way of:
- Improving the brand image.
- Preparing it for risk management through public goodwill in the event of crisis
- Retaining and attractive talent for the organization.
- Winning confidence of investors and shareholders,
- Improving its relations with important stakeholders, and
- Positioning the company for competitive business advantage and financial gains in
the long run.
Measurement of performances
Growing awareness about CSR and sustainability issues have led to attempt at devising some
A Monthly Double-Blind Peer Reviewed Refereed Open Access International e-Journal - Included in the International Serial Directories. International Research Journal of Commerce and Law (IRJCL)
Website: www.aarf.asia. Email: editoraarf@gmail.com , editor@aarf.asia
Page 26
transparency and impartial measurement. A number of international private initiatives in this
regard have led to the development of standards and benchmarks for voluntary disclosure,
reporting and audit of CSR and sustainability programmes. Most notables of these initiatives
are:
- Global Reporting Initiative's (GRI) Sustainability Reporting Guidelines.
- Institute of Social and Ethical Accountability: Accountability’s AA 1000
series of standard.
- Social accountability internationals (SAI): SA 8000 Standard.
- The ISO 14000 environmental management standard.
- ISO 26000: Social responsibility.
- Organisation for Economic co-operation and Development (OECD) CSR
policy rule.
- Global compact self-assessment tool.
Challenges to CSR initiatives sustainable
Today CSR activities are very important under the Companies Act 2013 and offering huge
opportunities for the companies to use sustainability report as an indirect tool for
communicating CSR activities. In the current world, with the increase of a more socially
responsible people infused into workforce has driven sustainable development for companies’
activities to a whole new land. Sustainability in every aspect be it supply chains, material
procurement, mergers and acquisitions, marketing, branding of finance and many more
functions is highly valued. Thus, one big challenge which remains is
- the companies have to see that which CSR activities are sustainable, be it
social or environmental.
With this challenge of having a self-sustaining CSR activity agenda the companies are
coming up with initiatives that are sustainable and work on understanding at which point to
drop or alienate from such activities which are detrimental or to the core work of the
company. Thus, corporate that respect and listen to their stakeholders must naturally be
concerned by their growth and profitability, but they must also aware of the economic,
environmental, social and societal impacts of their activities.
A Monthly Double-Blind Peer Reviewed Refereed Open Access International e-Journal - Included in the International Serial Directories. International Research Journal of Commerce and Law (IRJCL)
Website: www.aarf.asia. Email: editoraarf@gmail.com , editor@aarf.asia
Page 27
CSR is a concept with a growing impact around the globe. Today CSR goes for beyond the
philanthropy of the past, it is about the business contribution to sustainable development.
Therefore, the promotion of CSR as proactive solutions to societal and environmental
challenge, it can enhance competitiveness in the globalization context. Making CSR
mandatory for the corporate will certainly contribute in this direction. Though responsible
business is necessary but not sufficient condition of sustainable development, therefore type
of CSR that contribute best to sustainable development must be identified and focused by
corporate world.
References
Alan, D. Smith (2007). Making the case for the competitive advantage of corporate
social responsibility. Business Strategy Series, 8 (3), 186 - 195.
Ans Kolk and Rob van Tulder (2010). International business, corporate social
responsibility and sustainable development. International Business Review, 19 (2),
119-125.
Bazin, D. and Ballet, J. (2004). Corporate social responsibility: The natural
environment as a stakeholder? International Journal of Sustainable Development, 7
(1), 59-75.
Bhattacharya, C.B. and Sen, S. (2004). Doing better at doing good: when, why and
how consumers respond to corporate social initiatives. California Management
Review, 47 (1), 9–24.
Branco, M.C. and Rodrigues, L.L. (2007). Positioning stakeholder theory within the
debate on corporate social responsibility. Electronic Journal of Business Ethics and
Organization Studies, 12, 5–15.
Carroll, A. B. (1979). A three-dimensional conceptual model of corporate social
performance. Academy of Management Review, 4 (4), 497-505.
Clarkson, M. (1995). A stakeholder framework for analyzing and evaluating
corporate social performance. Academy of Management Review, 20 (1), 92–117.
Dawkins, J. and Lewis, S. (2003). CSR in stakeholder expectations: And their
implication for company strategy. Journal of Business Ethics, 44 (2-3), 185-193.
DesJardins, J. (1998). Corporate environmental responsibility. Journal of Business
A Monthly Double-Blind Peer Reviewed Refereed Open Access International e-Journal - Included in the International Serial Directories. International Research Journal of Commerce and Law (IRJCL)
Website: www.aarf.asia. Email: editoraarf@gmail.com , editor@aarf.asia
Page 28
Friedman, M. (1970). The social responsibility of business is to increase its profits.
The New York Times Magazine, 32–33, 122–126.
Gauthier, C. (2005). Measuring corporate social and environmental performance:
The extended life-cycle assessment. Journal of Business Ethics, 59 (1-2), 199-206.
Jenkins, H. M. (2004). Corporate social responsibility and the mining industry:
Conflicts and constructs. Corporate Social Responsibility and Environmental
Management, 11 (1), 23-34.
Maignan, I. and Ferrell, O. C. (2004). Corporate social responsibility and marketing:
An integrative framework. Journal of the Academy of Marketing Science, 32 (1),
3-19.
McWilliams Abagail and Siegel Donald (2001). Corporate social responsibility: A
theory of the firm perspective. Academy of Management Review 26, 117–127.
Moon, J. (2002). The social responsibility of business and new governance.
Government and Opposition, 37 (3), 385–408.
Porter, M and Kramer, M. (2002). The competitive advantage of corporate
philanthropy. Harvard Business Review, 57–68.
Porter, M. and Kramer, M. (2006). Strategy and society: The link between
competitive advantage and corporate social responsibility. Harvard Business
Review, 84, 12.
Quazi, A. M. and O'Brien, D. (2000). An empirical test of a cross-national model of
corporate social responsibility. Journal of Business Ethics, 25 (1), 33-51.
Van Marrewijk, M. (2003). Concepts and definitions of CSR and corporate
sustainability: Between agency and communion. Journal of Business Ethics, 44
(2-3), 95-105.
Zwetsloot, G. I. J. M. (2003). From management systems to corporate social
responsibility. Journal of Business Ethics, 44 (2-3), 201-207.
www.business-standard.com/.../companies/an-overview-of-csr-rules-und.
www.iso.org/iso/home/standards/iso26000.htm.